European renewables investor The Renewable Investment Group (TRIG) has warned of a “material impact” from COVID-19 on its power price forecasts, contributing towards a cut to the group’s net asset value (NAV).
In an update issued to the market today, TRIG confirmed that wholesale power price forecasts for jurisdictions in which it owns renewables assets had tumbled by an average of 17% for the forthcoming five years.
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This figure includes a significant decrease of 25% forecasted over the rest of 2020 and 2021, driven predominantly by a collapse in power demand associated with lower economic activity.
The effect of the pandemic on power demand and, in turn, pricing has been covered widely, with European solar developers last week expressing fears that the onset of subsidy-free developments could be beset by the changing market dynamics.
TRIG’s analysis would appear to compound those fears. In the UK market in particular, the firm is expecting an average cannibalised capture price for the power it generates of around £39/MWh (US$48/MWh) for the period 2020 – 2024.
Nearly three-quarters (74%) of TRIG’s revenue base is presently fixed, and the company has pointed at feed-in tariff-backed projects in both France and Germany as being of particular benefit as power prices contract.
But the short- to mid-term collapse in power prices still implies a reduction in TRIG’s NAV of around 5 pence per share. This is equivalent to a 4% drop.
TRIG owns a portfolio of wind, solar and battery storage projects throughout Europe with a combined generation capacity of 1.6GW.
Power price volatility is having unforeseen impacts on renewables across the board, not least of all in the Netherlands. This week, the country's renewables generators were warned that subsidy payments will be suspended if wholesale prices drop into the negative for six consecutive hours or more, as occurred in late March.
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